The ‘Unicorn’ Club, Now Admitting New Members

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Kirt McMaster, in a Transformers mask, and Steve Kondik, right, of Cyanogen, which is on a list of companies seen as candidates for passing the $1 billion valuation mark.CreditCreditJason Henry for The New York Times

SAN FRANCISCO — One hallmark of the current technology boom is a generation of start-ups valued at $1 billion or more by investors. Now meet the start-ups-in-waiting that may be next to reach that mark, if the white-hot market continues.

The $1 billion valuation metric was popularized two years ago by the venture investor Aileen Lee. She found that many of the start-ups that reaped the hugest riches for venture capital investors — Facebook and LinkedIn, for example — often reached a valuation of $1 billion or more while they were privately held. Because of their rarity, Ms. Lee called those companies “unicorns,” after the mythical creatures.

Since then, numerous start-ups have attained the $1 billion distinction — and topped it. With investors rushing to bet on the next big thing, the ride-hailing service Uber received a valuation of around $51 billion, while Airbnb, the online room-rental service, is pegged at about $24 billion. And every month, more companies are jumping into the unicorn echelon.

In total, there are now at least 131 such start-ups galloping across the private market landscape, and they are currently worth $485 billion to investors, according to the research firm CB Insights.

If the gold rush behavior continues, investors may create more billion-dollar companies. But stock markets worldwide took a beating last week, with the Standard & Poor’s 500-stock index falling below the closely watched 2,000 mark. The prominent Silicon Valley venture capitalist Bill Gurley recently said private investors could grow cautious if public tech stocks could not arrest their fall.

To find out which companies might be next to ascend, CB Insights, which tracks venture capital and start-ups, conducted an analysis for The New York Times. CB Insights used a proprietary software tool called Mosaic, which analyzes dozens of factors about a start-up, including the amount of money raised by a company, employee turnover, news and social media mentions, awards, customer growth and partnerships. It also examines the overall health of the industry in which the start-up competes, as well as what can be known about the quality of a company’s investors.

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Pressure to perform can increase with big valuations, according to Mr. McMaster, center left, of Cyanogen.CreditJason Henry for The New York Times

CB Insights won a grant from the National Science Foundation to build Mosaic, using machine learning and data science to turn unstructured text into a quantitative tool to measure company health.

The CB Insights analysis resulted in a list of 50 companies that cover the globe and span different tech sectors but speak to some of the trends from the current boom. Half of the companies on the list are based in San Francisco and Silicon Valley, the cradle of tech start-ups, but 10 are international, with several hailing from China and India.

Those countries are experiencing start-up booms of their own, with private companies such as the handset maker Xiaomi of China and the Indian e-commerce company Flipkart having already risen to unicorn levels. Now more American investors are pushing into those markets and into start-ups such as Uxin Pai, a Beijing-based used-car auction site, as they go further afield for investments while more money chases the same targets at home.

Many of the companies that CB Insights identified are also part of the hot tech sectors of the moment. In particular, investors are pouring money into service-oriented start-ups that let consumers get food, razors, handymen or piano teachers at the touch of an app. Those companies include the British food delivery start-up Deliveroo and Postmates, which delivers goods from any store or restaurant.

The satellite company Planet Labs and the drone companies 3D Robotics and Airware also appear on the list, showing how investors are betting on the skies as a source of future profit.

Being on the list is by no means a definitive marker of success, but it provides a snapshot of a company. Many of the start-ups identified by CB Insights — especially those that have been alive for about a decade, such as the wireless speaker and audio products maker Sonos — may never hit a billion-dollar valuation. The current members of the unicorn club all reached that status in less than eight years, according to data from Pitchbook, a private equity and venture capital research firm.

Others may find that valuations will stall if investors, burned by falling public tech stocks and alarmed by stock market fluctuations, rein in their private company bets. Mr. Gurley, the venture capitalist, said the boom may be at “an inflection point” and investors may refocus on profits instead of merely looking for growth.

Still, many entrepreneurs said they were happy to be on the list. The founder of the Beijing-based online learning company 17zuoye, Chang Liu, for one, said he had been striving for his start-up to become a unicorn.

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Tom Lee, One Medical Group’s founder.CreditBrian Harkin for The New York Times

Others, such as Kirt McMaster of the software maker Cyanogen, were more skeptical about the merits of inclusion. “The community gets carried away with the unicorn thing,” said Mr. McMaster, whose company is building a mobile operating system to rival Apple’s iOS and Google’s Android. “There are a lot of $1 billion companies that will never turn revenue positive and will cease to exist in the next couple of years.”

Mr. McMaster said he recognized there were benefits to gaining a big valuation. “Increasing my company’s valuation is a way to get money cheaper. Period,” he said.

Tom Lee, the founder of the primary care group One Medical, which is on the list, said the unicorn designation came with baggage and created pressure for entrepreneurs to perform. “People can assume a kind of high growth and potential for scale across different types of companies, or they can assume that you’re overvalued,” he said.

Mr. Gurley, who is at Benchmark, a venture capital firm that has invested in Uber and Snapchat, has long warned about drawing too much meaning from the unicorn milestone. In trying to achieve a $1 billion valuation, some entrepreneurs cut deals with investors — such as financial terms that promise investors a certain return on their money — that “in reality make the valuation lower,” Mr. Gurley said in an interview.

Early this year, Mr. Gurley said there would be “dead unicorns” in 2015. Now, he says, “zombie unicorns” would have been a more accurate term, since struggling companies rarely fail outright. Instead, they labor privately and are often forced to raise money or sell themselves for less than their previous valuations.

“The basic principles of probability say that a smaller percentage of them will hit the higher hurdles they need to make it to an initial public offering,” he said.

Ms. Lee, who coined the term unicorn, said there were more $1 billion private companies these days partly because big industries like hotels and taxis were now considered fair game for start-ups. The thing to watch, she said, is whether companies meet the expectations and goals they set when they became unicorns before they burn through the money they raised.

“If they don’t do that, they’re in a dangerous position,” she said.

A version of this article appears in print on , on Page B1 of the New York edition with the headline: ‘Unicorn’ Club Now Admitting New Members. Order Reprints | Today’s Paper | Subscribe